Chicago Sun-Times

THE WATCHDOGS: UNO’s secret spending spree

Dan Mihalopoulos

UNO Soccer Academy, one of the charter schools funded by the state grant to UNO. | Sun-Times file photo

Even as they ran a network of charter schools for thousands of students in low-income neighborhoods across Chicago, United Neighborhood Organization leader Juan Rangel and other UNO officials were piling up big bills at fancy restaurants and for travel on the taxpayers’ dime, records obtained by the Chicago Sun-Times show.

In the year before a contracting scandal led to Rangel’s forced resignation, the clout-heavy Hispanic community organization and charter-school operator spent more than $60,000 for restaurants on his American Express “business platinum” card, according to the records, which UNO fought for nearly three years to keep secret.

In 2010, Rangel traveled at the organization’s expense to Managua, Nicaragua, the records show. Rangel and two aides, Miguel d’Escoto and Francisco “Pancho” d’Escoto, met during that trip with the d’Escotos’ uncle, a former diplomat advising them on possible expansion.

Rangel’s and UNO’s fortunes took a downturn after the Sun-Times reported in February 2013 that the organization paid millions of dollars from a $98 million state school-construction grant to companies owned by two brothers of Miguel d’Escoto, who was Rangel’s top deputy, and to other contractors with close ties to the group.

As federal and state authorities began investigating, the newly obtained records show, UNO officials spent hundreds of thousands of dollars trying to contain the scandal, which cost the organization millions of dollars in state funding and resulted in a federal consent decree requiring outside oversight of the group’s contracting practices.

UNO has paid more than $962,000 since the start of 2013 to the firm of Mary Patricia Burns, who became the group’s primary lawyer shortly after the scandal broke.

Her law firm, Burke Burns & Pinelli Ltd., has been a major campaign contributor to Illinois House Speaker Michael Madigan. The state Democratic Party boss from the Southwest Side sponsored UNO’s state grant — which was the biggest government subsidy given to charter schools in the country. Burns didn’t return calls seeking comment.

The organization also paid more than $307,000 to retired federal judge Wayne Andersen and others who aided him in an investigation of UNO’s contracting practices.

The spending took place as UNO was operating a government-funded charter schools serving about 8,000 predominantly Hispanic students, largely from low-income families. About 96 percent of students at UNO’s 16 campuses qualify for free or reduced lunches, records show.

Despite being almost entirely government-funded, UNO leaders fought to keep the spending records secret, arguing that they didn’t have to comply with the state’s Freedom of Information Act because UNO is a private organization. But they ultimately released the records in a recent legal settlement with the Sun-Times.

Since UNO founded the charter-school chain in 1998, the Chicago Public Schools system has given the privately run schools hundreds of millions of dollars in taxpayer funding, in addition to the state funding the organization got for school construction. Until less than a year ago, the UNO Charter School Network — which is separately incorporated — passed along much of the CPS funding to UNO, which managed the schools.

The charter network cut ties with its former parent organization last year. Before then, it was paying UNO millions of dollars a year for management fees, rent for school buildings owned by the community group and janitorial services.

The records obtained by the Sun-Times also show that UNO paid:

Victor Reyes, in 2003. Sun-Times file photo

• More than $600,000 to the Roosevelt Group, a lobbying firm that worked for UNO to get the grant from Springfield in 2009. The Roosevelt Group is headed by onetime Hispanic Democratic Organization leader Victor Reyes and former Madigan aide Mike Noonan.

• More than $88,000 to Disney Resort Destinations, which hosted UNO employees who traveled to Florida for training.

• More than $72,000 for board insurance from Mesirow Insurance Services Inc. Mesirow, hired in 2013, has employed the House speaker’s son Andrew Madigan, who made a $2,500 contribution to UNO in November 2012.

• More than $65,000 to ASGK Public Strategies, a Chicago public-relations firm that helped UNO to respond to the crony contracting scandal.

• Nearly $150,000 for the grand opening of a new charter school on the Northwest Side in 2012. The cost covered fireworks, a laser-light show and a mariachi band to entertain a crowd that included Mayor Rahm Emanuel and then-Gov. Pat Quinn. UNO spent another $738.40 the next year to fly a son of baseball legend Roberto Clemente from Puerto Rico for an event naming the new school after Clemente.

• More than $11,600 for 42 buses that brought parents of UNO students to a September 2011 rally at the University of Illinois at Chicago for increased public funding of charter schools. The group also bused parents to demonstrate at City Hall, the Chicago Board of Education and the Thompson Center.

• $480 at the spa at the luxurious Peninsula Hotel. UNO officials say the organization bought gift cards for staff.

Rangel said in a written statement that the spending “must be put in the right context.

“Expenses were incurred to advance UNO’s mission and to be a world-class organization that supported our students, our schools and the Hispanic community,” Rangel said.

UNO began more than 30 years ago as a Hispanic community group on the Southeast Side but grew to be a major force in politics in all of the city’s fast-growing Hispanic neighborhoods. Rangel forged alliances with politicians including Madigan, former Mayor Richard M. Daley and Ald. Edward Burke (14th). He also served as co-chairman of Emanuel’s first campaign for mayor in 2011.

Fueling UNO’s growing clout was its entry into the charter business — and the government funding the schools brought. CPS funding to the UNO schools for the 12 months ending last June topped $85 million, out of the charter network’s total revenues of about $91 million, records show.

In 2014, the charter network paid the parent organization nearly $7.5 million in management fees, about $2.5 million in rent and more than $3 million for janitorial services. Those payments accounted for 87 percent of UNO’s income, records show.

In Illinois, as in many states, the law allowing for the creation of public financed but privately run charter schools requires them to hold open board meetings and make their records public. But UNO officials argued they didn’t have to open their books, saying the community group was only a contractor working for the charter network and didn’t deal directly with CPS.

The Sun-Times challenged that stance in 2013, citing UNO’s handling of all management functions for the schools. The newspaper also noted that UNO and the charter network at the time had the same leaders and also shared the same offices and record-keeping system.

Attorney General Lisa Madigan. | Rich Hein / Sun-Times file photo

The Illinois attorney general’s office, which referees Freedom of Information Act disputes, sided with the Sun-Times.

“For purposes of governing the charter schools, UNO and [its charter network] are inextricably intertwined and act as the same entity,” Atty. Gen. Lisa Madigan wrote in July 2013, ordering UNO to turn over the financial records.

UNO challenged the attorney general’s “binding opinion” in Cook County circuit court. A judge upheld the attorney general’s decision in February 2015, but UNO appealed.

Under new leadership, UNO eventually settled the case, providing the news organization with all of the previously disputed documents.

Those records detail how the organization’s leaders enjoyed perks that many of the working-class families served by the charter schools could only imagine.

Rangel — whose annual salary was $275,000 — and other UNO executives were regulars at some of the city’s most upscale restaurants. In 2012 and 2013, they incurred nearly 600 charges for meals, totaling more than $80,000.

The single biggest tab was on Aug. 15, 2012, for $2,387.81 at Roof, on the 27th floor of the Wit Hotel downtown.

There was also a $2,328 bill on March 13, 2012, at the East Bank Club, where UNO held meetings of its Metropolitan Leadership Institute for young Latino professionals.

Another big night was at Carnivale, where Rangel charged $1,867.13 in October 2012. UNO officials say the event was a celebration for staff and board members with October birthdays.

The largest single vendor among restaurants was Tio Luis Tacos on Archer Avenue on the Southwest Side. UNO spent more than $12,000 there in 2012 and 2013 for “community outreach events, staff meetings and board meetings.”

Rangel also used his UNO credit card to pay hundreds of dollars on concessions at Toyota Park in Bridgeview during Chicago Fire soccer matches. He said UNO “expressed its appreciation” to teachers, staff and parent volunteers at the soccer games and other events.

UNO’s travel spending eclipsed the in-town dining bills. The organization spent more than $68,000 on travel costs in 2011 and about $63,000 in 2010.

Records show Rangel’s travels included 10 trips to Washington, D.C., seven to New York, three to New Orleans, two to Boston and one each to Memphis and San Francisco. UNO officials said their records indicate outside organizations paid for only a few of those trips.

Cuauhtemoc Blanco waves to fans at the Azteca stadium in Mexico City on March 5. AFP / Getty Images

UNO paid for Rangel to fly to Mexico in 2010 and China in 2012. Organization officials said Rangel visited soccer academies operated by former Chicago Fire star Cuauhtemoc Blanco and the Pachuca professional club. He and three other UNO leaders accompanied students who made a trip to Beijing and Shanghai, according to the group’s records.

“I and others at UNO sought out partnerships to bring additional resources and funding from a number of organizations and institutions in New York, Washington, D.C., and many other cities and countries,” Rangel said.

Twenty of the organization’s employees, including Rangel, flew to Orlando in April 2012. The costs for those plane tickets totaled more than $8,400. That was in addition to the costs for the training sessions at the Magic Kingdom and a Disney event here.

“UNO always sought out the best training for its staff, including the Disney Institute, to make sure that our students got the best education experience that the Hispanic community deserves,” Rangel said.

Besides the trip to Nicaragua with Rangel and his cousin Francisco d’Escoto, Miguel d’Escoto made two more trips at UNO’s expense to the Central American country in 2010. His uncle Miguel d’Escoto Brockmann is a Catholic priest who was president of the United Nations General Assembly in 2008 and 2009 and previously was Nicaragua’s foreign minister.

Miguel D’Escoto said he and Rangel met with his uncle to try to form a group that could provide education “in areas or conditions of crisis.”

Miguel d’Escoto quit his $200,000-a-year post at UNO eight days after the first of the Sun-Times’ reports on the group’s spending were published.

Andersen, the retired judge, was then hired by UNO at a rate of $800 an hour — altogether being paid more than $59,000.

UNO also paid for two lawyers ($148,264.62), a real-estate development expert ($60,182.50) and a licensed private investigator ($8,667.50) to aid Andersen.

After Rangel promised to institute reforms suggested by Andersen, state officials lifted a suspension of UNO’s grant in June 2013. But the state funding was frozen again after the U.S. Securities and Exchange Commission launched a probe that resulted in civil fraud charges against UNO. In June 2014, the group settled the charges, which accused UNO of misleading bond investors about the insider deals.

In the end, the scandal cost UNO $15 million of the promised $98 million state grant.

UNO had paid $604,500 to the Roosevelt Group lobbyists between December 2006 and August 2013, records show.

The lobbyists at first charged UNO $3,000 a month, raising that to $7,500 in June 2009 — when the Illinois General Assembly approved the grant for new school buildings.

The Roosevelt Group billed an extra $25,000 the day after the law approving the grant took effect. That was for “consulting services for charter capital campaign.” There also was a $110,000 “additional payment” to the lobbyists in July 2010, six weeks after the state wired the first payment from the grant, for $25 million.

In a resignation letter in October 2013, Reyes wrote to Rangel that the two large, additional payments to the Roosevelt Group were to compensate his firm for having given UNO a discount during the early years of their dealings.

Noonan declined to comment.

Rangel, now 50, resigned under fire in December 2013 and was given a severance payout of $206,250. He had started at UNO in 1992, becoming CEO in 1996.

The board of the UNO Charter School Network declined to extend its management deal with the parent organization, which ended last June. In November, UNO officials said the organization was “on the brink of insolvency.”

Feb. 4, 2013 — First stories in Sun-Times investigation expose how contractors with insider ties are profiting from the state grant — including companies owned by two brothers of top Rangel aide Miguel d’Escoto that were paid millions of dollars.

October 2013 — Gov. Pat Quinn’s administration cuts off remaining $15 million in funding from $98 million state grant.

June 3, 2014 — U.S. Securities and Exchange Commission files and immediately settles civil charges against UNO, accusing it of defrauding bond investors. UNO promises never again to hand out insider deals and agrees to oversight by a federal monitor.